your cash flow in a few simple steps

Craig Veurink

by Leonard Segal

Tips

1. Minnesota passed a new law banning non-competition agreements as of July 1, 2023.

Tips

2. Several agreements not covered in the new law include nondisclosure agreements, agreements designed to protect trade secrets or confidential information, nonsolicitation agreements or agreements restricting the ability to use client or contact lists.

1. Set a realistic goal for when you want to break even. This will help you to focus your efforts and provide a numerical benchmark for projecting your cash flow in the near future

2. Put cash flow before profits. It might seem counterintuitive, but if you aren’t organizing your cash flow, you’ll run into problems that a profitable quarter might not be able to fix

3. Narrow exceptions to the new law include allowing non-competition agreements, if reasonable in length and geographic area, as part of a sale of a business or if agreed upon in anticipation of business dissolution.

3. Secure credit ahead of time. Most small business owners should secure as much credit as possible. This is the best way to be prepared for the unexpected

4. Non-competition agreements are also under scrutiny at the federal level. Business owners should keep an eye out for changes.

4. Consider using a payroll service. Having the professionals take care of collecting payroll taxes saves them an enormous amount of time, helps streamline their cash flow genius is 1 percent inspiration and 99 percent perspiration, successfully running a small business requires rolling up your sleeves and putting in significant time on more mundane, day-today matters.

On May 24, 2023, Gov. Tim Walz signed legislation into law prohibiting employers from entering into non-competition agreements with both employees and independent contractors. This new law took effect on July 1, 2023, and applies to agreements entered into on or after that date.

You can be driven, impassioned and have a great idea to fill a niche or serve customers in new ways, but if you don’t attend to the details of the business, you can create for yourself a heap of problems.

Rather than wonder, set a realistic goal future.

2. Put cash-flow management before profits

the employment relationship, from:

(i) working for another employer for a period of time, (ii) working in a specified geographical area, or (iii) working for another employer in a similar capacity to the work the employee did for the employer that is party to the agreement.

This might seem counterintuitive, since profits are how you survive. However, if you aren’t organizing your cash flow, you’ll run into problems that a profitable quarter might not be able to fix. Keep things organized and well managed so you can be ready for whatever success comes your way.

5. Schedule your payments. Don’t go delinquent but do divide your payments into categories such as “must pay,” “important to pay” and “flexible payment terms.” This can help keep sufficient cash on hand.

5. Consider, instead, nonsolicitation agreements and agreements restricting former employees from using client or contact lists. Do so narrowly, however, so they don’t violate the new Minnesota law.

Here, we’ll look at one of the most important of these business details: managing cash flow. Especially for early startups, knowing how much cash is coming in and going out, and accurately forecasting sales and expenses, is key to maintaining your company’s health.

No matter where you are in your business, keep these things top of mind:

A non-competition provision in violation of the new law is void and unenforceable, according to Minnesota statute 181.988. If part of a larger agreement, the fact the noncompete is void would not render the remainder of the agreement void. In addition to other remedies, a court may award reasonable attorneys’ fees to an employee who is enforcing their rights under the new law.

1. Know when you will break even

Every small business owner keeps at the front of their mind the question:

As defined in the new law, covenants not to compete are agreements that prevent an employee (including independent contractors), after termination of

Under the statute, several agreements are not considered covenants not to compete. These include: a nondisclosure agreement, an agreement designed to protect trade secrets or confidential information, a nonsolicitation agreement, an agreement restricting the ability to use client or contact lists and an agreement not to solicit customers of the employer.

3. Secure credit ahead of time

Too often, small business owners wait until they need it to secure credit. This can cause a lot of unnecessary stress, or worse. Talk to experienced business owners in your area and industry ahead of time to know how much revenue you’ll need up front. Take a realistic look at the situation and plan. You might have sufficient cash reserves or a rich uncle who is only a call away, but most small business owners should secure as much credit as possible. This is the best way to be prepared for the unexpected.

There are two narrow exceptions to the prohibition on non-compete agreements, according to the statute: (1) In the sale of a business, non-competition agreements are allowed as long as they are for a reasonable length of time and within a reasonable geographic area; and (2) a non-compete agreement is allowed if it is agreed upon in anticipation of the dissolution of a business.

Parties cannot enter into an agreement in an attempt to make an end run around the new Minnesota law. Specifically, an employer cannot require that an employee who primarily resides and works in Minnesota agree to a provision that would: (i) require the employee to adjudicate a claim arising in Minnesota in a jurisdiction outside the state, or (ii) deprive the employee of the substantive protection of Minnesota law with respect to a controversy arising in Minnesota. Any such provision is voidable by the employee and if a provision is rendered void at the request of an employee, any legal action must be brought in Minnesota and will be governed by Minnesota law.

Developments at the federal level

In addition to the new Minnesota law and actions taken in other states, non-competition agreements are also in jeopardy at the federal level. The Federal Trade Commission has proposed a rule that would ban non-compete agreements nationwide.

If that becomes a final rule in its current form, then unlike the new Minnesota law, it will be retroactive and likely would ban nonsolicitation agreements as well. More recently, the National Labor Relations Board has stated that it believes most noncompetition agreements infringe upon non-management/supervisor employee rights under Section 7 of the National Labor Relations Act.

Considerations for employers

The new Minnesota non-compete ban is a substantial development in Minnesota law. Employers should take steps now to protect their business and ensure they are not in violation of the new law. For example:

• Review current agreements for prohibited noncompetition provisions. As noted, the new law is not retroactive, but employers should be careful not to continue to use such agreements going forward.

• For agreements entered into since July 1, 2023, do not include prohibited covenants not to compete.

• Consider using nonsolicitation agreements and agreements restricting a former employee from using client or contact lists. In so doing, however, do not make such agreements so broad that they effectively become covenants not to compete in violation of Minnesota law.

• Review and update confidentiality and trade secret protections. Be sure confidential information is treated as such (e.g., limit access to such information, label such information as confidential and take other reasonable steps to preserve confidentiality).

• Keep an eye out for further developments at the federal level.

Contact: Leonard Segal is a partner with Segal Duffek Moen PLLC: 952.358.7400; lsegal@sdmlawyers.com; www.sdmlawyers.com; in/leonardsegal